Pressing Short Bets With Technology ETFs

 |  Includes: AAPL, GOOG, NFLX, QQQ, XLK, XRT
by: Danny Furman

No major U.S. reports are scheduled to be released before, during or after trading Monday, June 20. Despite finishing in the green consecutive days to close the prior week, stock indexes sold off intraday on both occassions, as depicted by a rising VIX. Without a positive catalyst, any rallies will be short lived as downward trading momentum has lasted nearly two months.

Asian markets continue to slide. Hong Kong's Hang Seng Index opened up over a hundred points June 20, sold off all morning and trades in the red at time of writing. Japan's Nikkei is also staging an ugly reversal. China's Shenzen and Shanghai Indexes have suffered the greatest losses since April of this year and both are down over 1% late in the June 20 session. Weakness across Asian markets has Dow Jones futures down 60 points.

Earnings season is over, QE2 has all lost all but the last of its steam and U.S. data, from housing to employment to consumer confidence, continues to disappoint.

The DJIA won the battle against gravity to hold 12,000 last week. Still, the index hasn't managed to open below and close above that level since breaching it June 10. As explained recently here, no sign of a short term bottom has been evident. Selling momentum of indexes and individual stocks during normal trading hours has not let up. Many leading stocks, such as Apple (NASDAQ:AAPL) and Google (NASDAQ:GOOG), suffered losses from violent sell offs June 17 while broad indexes barely held onto gains.

Monday will begin a monumental test of investor confidence. The market appears to once again be faced with an opportunity to rally above and beyond 12,000 after gapping down below. I won't be looking to cover any bearish bets in early trading. Rather my intention is to add to short positions on any sort of bounce. Now short the SPDR S&P Retail ETF (NYSEARCA:XRT) and Netflix (NASDAQ:NFLX), I'll be looking buy puts on technology ETFs. The sector is priced for high growth and has shown greater weakness than others throughout 2011. Specifically, I'll be targeting near the money July puts on XLK and QQQ in early trading June 20.

Disclosure: I have no positions in any stocks mentioned, but may initiate a short position in QQQ, XLK over the next 72 hours.